Information, Credit, and Organization

Jose Maria Liberti, Amit Seru, Vikrant Vig

Research output: Working paper

Abstract

This paper investigates the effect of a change in informational environment of borrowers on the organizational design of bank lending. We use micro-data from a large multinational bank and exploit the sudden introduction of a credit registry, an information-sharing mechanism across banks, for a subset of borrowers. Using within borrower and loan officer variation in a difference-in-difference empirical design, we show that expansion of credit registry led to an improvement in allocation of credit to affected borrowers. There was a concurrent change in the organizational structure of the bank that involved a dramatic increase in delegation of lending decisions of affected borrowers to loan officers. We also find a significant expansion in scope of activities of loan officers who deal primarily with affected borrowers, as well as of their superiors. There is suggestive evidence that larger banks in the economy were better able to implement similar changes as our bank. We argue that these patterns can be understood within the framework of incentive-based and information cost processing theories. Our findings could help rationalize why improvements in the information environment of borrowers may be altering the landscape of lending by moving decisions outside the boundaries of financial intermediaries.
Original languageEnglish (US)
PublisherSocial Science Research Network (SSRN)
Number of pages60
StatePublished - Jun 2016

Fingerprint

Credit
Loans
Registry
Micro data
Delegation
Multinational banks
Information sharing
Organizational structure
Difference-in-differences
Incentives
Information environment
Financial intermediaries
Bank lending
Lending decisions
Lending
Organizational design
Information costs

Cite this

Liberti, J. M., Seru, A., & Vig, V. (2016). Information, Credit, and Organization. Social Science Research Network (SSRN).
Liberti, Jose Maria ; Seru, Amit ; Vig, Vikrant. / Information, Credit, and Organization. Social Science Research Network (SSRN), 2016.
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Liberti, JM, Seru, A & Vig, V 2016 'Information, Credit, and Organization' Social Science Research Network (SSRN).

Information, Credit, and Organization. / Liberti, Jose Maria; Seru, Amit; Vig, Vikrant.

Social Science Research Network (SSRN), 2016.

Research output: Working paper

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Liberti JM, Seru A, Vig V. Information, Credit, and Organization. Social Science Research Network (SSRN). 2016 Jun.